AA to split into 2 companies. Any interest?

[billyjoe]

Alcoa (AA) announced its intention to split into 2 separate companies, one old school aluminum only, the other, higher tech products using aluminum and titanium for automotive, aerospace, and other applications. Zacks among others have downgraded AA citing the continuing drop in commodity prices. Is this a great opportunity or a move to redirect attention from a declining industry? Anyone buying?

------------billy

[riverbabe]

Alcoa (AA) announced its intention to split into 2 separate companies, one old school aluminum only, the other, higher tech products using aluminum and titanium for automotive, aerospace, and other applications. Zacks among others have downgraded AA citing the continuing drop in commodity prices. Is this a great opportunity or a move to redirect attention from a declining industry? Anyone buying?

------------billy

sitting on my hands, waiting for bottom

[mimo_100]

This is my experience over the years. Many believe the sum of the pieces is greater than the whole in these situations. Sometimes one part of the business is dragging down the other. Stockholders complain so the board breaks the companies apart. I think the most important thing to look at is this: is the company undervalued so that breaking it apart will unlock value and thus allow the pieces to each trade at a higher P/E?

[Louetta]

Cramer's book Get Rich Carefully on pages 62-64 gives a detailed discussion of Alcoa, their aircraft fastening business, autos and what-nots and Klaus Kleinfeld's efforts to develop new applications for the light weight aluminum. Only as an afterthought does he mention they make aluminum. Cramer clearly has a lot of man-love for Kleinfeld, a frequent guest on Cramer's show, and this might color his opinion. But, after reading what Cramer wrote one would be sorely tempted to buy the applications part off the business as opposed to the upstream manufacturing. How to get in the cheapest way might be a question.

[billyjoe]

This is my experience over the years. Many believe the sum of the pieces is greater than the whole in these situations. Sometimes one part of the business is dragging down the other. Stockholders complain so the board breaks the companies apart. I think the most important thing to look at is this: is the company undervalued so that breaking it apart will unlock value and thus allow the pieces to each trade at a higher P/E?

Mimo, AA is down 39% YTD. Is it now undervalued or fairly valued?

-----------------billy

[billyjoe]

Louetta, Just buy it now. When it splits sell the part you don't want. Seems as if there is a bad half (aluminum?), a slight loss would be more than offset by the uptick in the good half (applications) unless the reasoning is flawed and commodities take off.

---------------billy

[Louetta]

Louetta, Just buy it now. When it splits sell the part you don't want. Seems as if there is a bad half (aluminum?), a slight loss would be more than offset by the uptick in the good half (applications) unless the reasoning is flawed and commodities take off.

---------------billy

I'm sure you're right. I always get screwed when I try to arabesque things to get up a nickel a share.

[mimo_100]

Mimo, AA is down 39% YTD. Is it now undervalued or fairly valued?

-----------------billy

Summarizing: There is a glut in most commodities and aluminum and bauxite are no different. The new raw aluminum operations company name will have Alcoa in it. The more profitable parts-making units will be part of the “value-add company.”

We know valuing a company is a guessing game but we can look at past earnings increases,
future cash flows, future revenues, EBITDA divided by revenue = EBITDA margin, and debt
to name a few.

Best person to ask would be HisHugeNess himself - how does he value AA pre-split at the current price?

[billyjoe]

Just bought a little bit of AA at 9.46. Am watching closely for any significant action.

---------------------billy

[mimo_100]

Just bought a little bit of AA at 9.46. Am watching closely for any significant action.

---------------------billy

billy,

Hoping we are somewhere near the bottom on this stock. I have an open order at 9.01 AON which I do not expect to get filled soon. Earnings out in a week or so. Whenever I set a limit over 5% away from the market, I hardly ever get a fill. This is good news for you at 9.49. LOL!

[billyjoe]

Mimo, Hit 9.10. 9.01 might be near.

---------------billy

[mimo_100]

Mimo, Hit 9.10. 9.01 might be near.

---------------billy

Cancelled the order over the weekend - who knows what craziness may happen.

[billyjoe]

Just sold at 10.90. About 14.5% in 7 days. Hope to be able to repeat after it drops. At least I'm thinking it will.

----------------billy

[riverbabe]

AA reports today after market. Hello earnings season again.

[mimo_100]

Just sold at 10.90. About 14.5% in 7 days. Hope to be able to repeat after it drops. At least I'm thinking it will.

----------------billy

Everyone expects lower earnings - interesting to see what happens.

I am following DISH for a quick trade.